Durbin Backtrack May End Bank Bashing

The rule may be a bellwether for the public mood on financial companies.

NEW YORK ( TheStreet)-- U.S. policymakers appear to be having second thoughts about the Durbin amendment, one of the more onerous rules to come out of the financial reform legislation.

If the rule gets substantially watered down, or possibly even eliminated, it could signal an end to "basically two and a half years of bank bashing and blaming the banks for everything," argues Tom Brown, head financial services-focused investment firm Second Curve Capital.

Such sentiment has caused bank stocks to trail the broader market for much of the past 12 months, after they led the rally off the bottom in the prior 12 month period starting in March 2009.

"If you did have a change here I would interpret it as a signal that the pendulum has stopped swinging against the banks," Brown says.

The Durbin amendment would sharply curtail fees banks and card companies like Visa ( V) and MasterCard ( MA) get from merchants for debit card transactions, costing the banking industry $12 billion to $14 billion in profits, according to a recent presentation Bank of America ( BAC) made to investors.

Bank of America consumer small business and card banking President Joe Price says that while the bank has been "generally supportive" of regulatory reforms, "we do have some concerns specifically related to the Durbin amendment."

"There are going to be series of other things, we call them metering fees, that we're going to be thinking through, charging you for things that you get today for free and so we've got lots of opportunities to charge people," JPMorgan retail banking chief Charlie Scharf told investors last month in a presentation that devoted considerable time to attacking the rule.

"We just want to be very clear and make sure everyone understands what we think, which is we continue to believe that this is a terrible mistake and it's not a terrible mistake for us, but it's a terrible mistake," he said.

Scharf argues the rule will cause 5% of JPMorgan's customers "to wind up exiting the banking system entirely and wind up at places like check cashers and other companies which charge them ultimately much more than they wind up paying here."